A year-long credit union initiative has unlocked about US$2.5 million (approximately Sh320 million) in financing for 93 small and medium enterprises (SMEs) in Kenya, highlighting the potential of SACCOs to become a stronger source of capital for businesses often overlooked by traditional lenders.
The programme, led by the World Council of Credit Unions (WOCCU) and the Worldwide Foundation of Credit Unions (WFCU), brought together three Kenyan SACCOs — Unaitas, Boresha SACCO and Kenya Police SACCO — and the African Confederation of Co-operative Savings and Credit Associations (ACCOSCA) Academy.
At the heart of the initiative was a familiar challenge for Kenyan entrepreneurs: having a viable business does not always translate into access to finance.
Small businesses may have established customers, regular sales and clear opportunities for expansion but lack land, buildings or other conventional assets that lenders typically require as security. The result is that some businesses remain small not because of a lack of demand, but because they cannot secure enough working capital to grow.
The initiative sought to address this gap by strengthening the ability of SACCO staff to assess businesses based on cash flow, repayment capacity and growth prospects, rather than relying primarily on existing assets.
A different approach to SME lending.
The training gave SACCO officers new tools for understanding the financial position and prospects of small businesses, while also encouraging stronger relationships between lenders and entrepreneurs.
“The business of the member is more important than the collateral,” said Beatrice Mathu, a relationship manager at Unaitas, describing the change in approach.
The results have provided an early indication of the potential of the model. WOCCU says the 93 participating SMEs recorded non-performing loans of below one per cent, significantly below the programme’s target ceiling.
The experience is also influencing lending strategy within participating SACCOs.
Nephat Murimi, head of SME lending at Unaitas, said the appraisal tools introduced through the programme had laid the groundwork for a dedicated SME strategy that the SACCO plans to roll out across its branches.
From a small shop to two outlets.
The impact of the financing can be seen in the experience of Gaceri Wallace, who runs an electrical and electronics business with her husband in Thika.
The couple established the business 16 years ago and expanded gradually as capital became available. Limited working capital, however, sometimes left them unable to stock products demanded by customers.
A loan from Unaitas enabled them to increase their inventory and take advantage of demand that had previously been difficult to serve.
The business has since expanded to two outlets and created two additional jobs. Monthly sales have risen from about Sh1.5 million to Sh2 million, while profits are helping the family build a home.
Another beneficiary, Geoffrey Kagwanja Karuma of Murang’a County, used financing to expand an animal-feed production business.
Karuma entered the sector after observing that farmers in his area struggled to find reliable supplies of quality feed. The additional capital enabled him to purchase inputs in larger quantities and extend his market to farmers, co-operatives and retailers.
His business now records approximately Sh1.6 million in monthly sales, with its growth supporting activity among other players in the local agricultural supply chain.
Building capacity beyond the 93 businesses.
The initiative’s impact extends beyond the businesses that received financing.
WOCCU and its partners developed five training manuals covering SME market research, loan appraisal, KYC/AML, emerging risks and environmental, social and governance (ESG) issues.
The manuals were piloted with SACCO staff through the ACCOSCA Academy and are intended for wider use across Kenya and the region.
This could help other SACCOs strengthen their capacity to identify and finance viable enterprises while managing the risks associated with SME lending.
For Kenya’s co-operative movement, the opportunity is significant. The regulated SACCO sector manages more than Sh1 trillion in assets, giving it substantial financial capacity to support businesses and household enterprises.
With SMEs accounting for a large share of economic activity and employment, improving their access to working capital can have effects beyond individual borrowers — from creating jobs and increasing local purchasing to strengthening agricultural and commercial supply chains.
The initiative therefore offers an important lesson for Kenya’s SACCO sector: effective SME lending does not necessarily mean eliminating risk, but developing better ways of understanding and managing it.
By combining member relationships with stronger business appraisal skills, SACCOs can potentially move beyond being simply savings and loan institutions to becoming more active partners in enterprise growth.
For thousands of Kenyan entrepreneurs seeking capital to expand shops, farms, workshops, manufacturing businesses and service enterprises, that shift could make the difference between remaining a small operation and moving to the next stage of growth.
